Strategies to Renew Federal Facilities (2023)
Chapter: 7 Conclusions and Recommendations
7
Conclusions and Recommendations
INTRODUCTION
This chapter identifies the committee’s conclusions, defines the key elements of a federal facilities renewal strategy, and establishes recommendations necessary to ensure that federal facilities sustain their critical missions—now and in the future. This report responds to the Federal Facilities Council’s request that the National Academies of Sciences, Engineering, and Medicine form an ad hoc committee to describe the how and not the what for adapting, restoring, recapitalizing, and replacing assets sustainably, and addresses the key research questions raised by the Federal Facilities Council in the statement of task.
The committee conducted three public meetings and heard from 28 facility and budget experts from Congress, federal agencies, nonfederal governmental offices, and private-sector real estate officials to understand and synthesize the issues and constraints associated with planning, programming, and managing federal facility portfolios to support the missions of federal agencies. Appendix B lists the key experts and their organizations who presented information to the committee.
IMPETUS FOR TRANSFORMATIONAL CHANGE
The committee determined that implementation of successful federal facility renewal strategies must be approached as an asset management solution solving an asset management problem. Today’s federal facility management operating environment is much like yesterday’s operating environment: not enough money is being invested in federal facilities, which impacts agency mission execution
detrimentally. Insufficient funding is due to the government’s need to respond to changing priorities. This is acknowledged and will happen, but failure of an agency to report the full extent and impact of unfunded facility requirements is a failure to fulfill its fiduciary responsibilities to Congress and the American people. In the words of one federal financial and facility expert who met with the committee,
Agency senior leaders have a list of requirements, many of which are unmet, and they will continue to underfund those that are the least immediate in impact. Facilities fit there, until they don’t. But even in a cost-strapped environment, you win the argument to rebuild a building you absolutely need now. You often lose the argument to reduce future costs or extend its useful life.1
Responding to this reality, the report details a bold, new approach based on management system thinking. This approach focuses problem solving not on managing assets, but on managing the value generated by assets. Although nuanced, this change in perspective will have a dramatic effect on agency facility management behaviors. Instead of focusing on facility asset life-cycle management activities, it focuses on how facilities support mission needs and stakeholder value. To be effective, new understandings, capabilities, and policies will have to be developed and implemented. Only through transformational change in implementing facility asset management systems will federal agencies gain the focus needed for improving facility resource-and-investment decision making, and ultimately for improving agency mission performance.
DEFINING THE ELEMENTS OF A FEDERAL FACILITIES RENEWAL STRATEGY
The committee began its work by defining renewal and establishing context for federal facility renewal strategies. In Chapter 1, the committee defined renewal as the extension of an asset’s functionality beyond its expected service life through significant renovation, replacement, or repurposing. All assets eventually require reinvestment to adapt to changing times, missions, and operational requirements. Given operating constraints, federal agencies typically focus on sustainment funding for keeping the infrastructure running, rather than optimal investment strategies for their mission. Few agencies have systematically renewed their real property portfolios. As a result, the real property portfolios of many federal agencies are in increasing need of major rehabilitation, retirement, or replacement.
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1 Discussion between the committee chair and the Honorable John Conger, former Deputy Comptroller, Department of Defense, on August 3, 2020.
The committee believes a federal facilities renewal strategy is more than a vision. It is a policy embracing an action plan for an agency’s real property portfolio. The report evolves this context into a facility asset management system approach that is implemented through the Office of Management and Budget (OMB) and agency policies adapted to their specific circumstances. Throughout, common asset management principles, objectives, and processes are used to guide risk-based, resource-and-investment decision making. The purpose of federal facility renewal strategies is stated as ensuring and assuring that federal facilities are being used to achieve the agency’s mission efficiently and effectively.
Committee Statement of Task and Defining Elements for Facility Renewal Strategies
The committee’s task was “to identify broad-based and practical strategies for federal facilities managers to continue investing in, and renewing, federal real property portfolios in alignment with their authorized purpose.” The committee concluded its deliberations by defining the following key elements of any agency strategy on the renewal of federal facilities:
- An asset management systems approach is critical for real property portfolio management to ensure and assure alignment with mission objectives and priorities; to integrate annual operating costs with planned, periodic investment in (capital) construction and rehabilitation; and to mandate its use in statutory, policy, and agency directives.
- Capital planning and risk management tools and methods meet knowledge-based, professional standards for accuracy, rigor, transparency, and credibility. These tools and methods must effectively streamline understanding and link the cause and effect of facility performance with agency performance and vice versa.
- Budgeting structures plan for sufficient resources to implement facility renewal strategies, including user charges for the full cost of acquiring, operating, maintaining, and disposing of facilities; aggregating funds in revolving or working capital funds to prioritize investments across the portfolio and avoid funding “spikes”; establishing capital acquisition financing funds, such as the proposed Federal Capital Revolving Fund, to provide agencies with a source of capital they can repay over time; and privatization or use of public–private partnerships to devolve those public facilities and related services that are not inherently federal government responsibilities.
- Strategic communication strategies ensure and assure that stakeholders and decision makers understand the short- and long-term costs, benefits, and risks of federal facility renewal strategies and their relationships to achieving agency mission objectives.
RECOMMENDATIONS
The committee concludes its report by providing the following recommendations and listing relevant findings, which can be found in their corresponding chapters:
RECOMMENDATION 1: Implement a Federal Facility Asset Management System
The Office of Management and Budget (OMB), in concert with the Federal Real Property Council, should update OMB Circulars A-11 and A-123 to improve guidance for implementing facility asset management systems by
- Requiring federal agencies to use a comprehensive and principle-based facility asset management system, as defined by International Organization for Standardization 55000—Asset Management System standards, to implement federal facility renewal strategies;
- Clarifying how enterprise risk management and internal controls support implementation of federal facility renewal strategies by improving and clarifying policies contained in OMB Circulars A-11 and A-123;
- Clarifying agency senior real property officer’s fiduciary responsibilities to ensure and assure that the agency is maintaining its facility portfolio efficiently and effectively, and that achievement of this responsibility is reported as part of the agency’s OMB Circular A-136—Financial Reporting Requirements;
- Detailing how whole asset life-cycle costs, whole asset portfolios, and whole benefit analysis support resource-and-investment decision making; and
- Updating OMB Circular A-11, Section 83 (Object Classification) to remove fragmentation and many-to-many relationships that make it exceedingly difficult to generate and audit integrated real property performance–budget and management balance sheets.
(See Findings 2-1, 2-2, 2-3, 2-4, 3-1, 3-3, 3-4, 3-5, 3-6, 3-7, 5-1, 5-2, and 6-1.)
RECOMMENDATION 2: Implement a Real Property Capital Plan
The Office of Management and Budget (OMB) should clarify its requirements for agencies’ annual real property capital plans as detailed in OMB Circular A-11’s Supplement—Capital Programming Guide and OMB Memorandum M-20-03, “Implementation of Agency-wide Real
Property Capital Planning.” Specific requirements needing clarification include
- Ensuring the requirement for agencies to develop and publish a single, fully integrated real property capital plan as a component of the agency capital plan, as defined in the Capital Programming Guide;
- Verifying the relationship of real property capital plans in informing annual budget and investment decision making, including the successful inclusion of urgent and compelling facility renewal needs; and
- Publishing the role of the agency’s real property capital plan by documenting and communicating the agency’s strategy for reconciling agency objectives, budgets, and real property programs.
Furthermore, agency senior real property officials should implement guidance in OMB M-20-03 for advancing the central role of their agency’s real property capital plan, establishing a strategy for integrating and reconciling requirements, objectives, budget, and real property program execution.
(See Findings 2-4, 3-1, 3-2, 3-3, 3-4, 3-5, 3-6, 3-7, 6-1, 6-2, 6-3, and 6-8.)
RECOMMENDATION 3: Update the National Strategy for the Efficient Use of Real Property
The Office of Management and Budget (OMB) should clarify how the National Strategy for Efficient Use of Real Property and OMB Memorandum M-20-10 (Issuance of an Addendum to the National Strategy for the Efficient Use of Real Property) are used to guide their agency’s asset management system implemented through real property capital plans. Specific requirements include the following:
- Defining how agencies are to use the National Strategy to establish priorities and objectives for the efficient use of real property, to include addressing the Government Accountability Office’s real property high-risk issues, and
- Establishing requirements that link performance reporting of budget execution for the real property capital plan to National Strategy objectives, as reviewed annually by the agency in the context of agency strategic plan reporting, such as through application of the Operational Readiness Principle.
Furthermore, chief management officers and chief budget officers should ensure they coordinate their agency’s response to OMB M-20-10 (Issuance of an Addendum to the National Strategy for the Efficient Use of Real Property) with their agency’s response to OMB Memorandum
M-20-03 (Implementation of Agency-wide Real Property Capital Planning).
(See Findings 2-2, 2-3, 2-4, 3-2, 3-3, 3-5, 3-6, 3-7, 4-4, 4-5, 5-1, 5-2, 6-5, 6-7, and 6-8.)
RECOMMENDATION 4: Improve Federal Facility Models, Data, and Measures
The Office of Management and Budget (OMB) should clarify guidance requiring agency senior real property officials to improve cost estimates of renewal requirements. Currently, there is no broadly accepted approach to estimating renewal costs, which diminishes the credibility of renewal decision making. After considering two of the methods available, the committee recommends the following:
- Senior real property officials should adopt an economic depreciation2 approach for estimating renewal costs, tailorable to each agency’s facility portfolio. As a starting point, the model could be simplified to a set of cost factors by facility type, analogous to the Department of Defense Facility Sustainment Model.
- Agencies should include existing dated depreciation rates and service lives in the economic depreciation approach review by using a schedule established for the revision of depreciation rate and service life data used in depreciation models, which is currently provided by the Department of Commerce’s Bureau of Economic Analysis.
Furthermore, the General Services Administration (GSA), in coordination with the Federal Real Property Council and under the direction of OMB, should create an independent database of component inventories for federal facilities, beginning with the extensive data collected for the Builder system, and make it available to qualified users and accessible by popular capital planning and facility management systems. The senior real property officials of all agencies would submit information to GSA for compiling, as directed by executive requirement.
(See Findings 3-5, 4-1, 4-2, 4-3, 4-4, 4-5, and 6-3.)
RECOMMENDATION 5: Implement Federal Facility Renewal Budgeting Strategies
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2 Economic depreciation refers to how an asset (structures, for example) declines in productivity over time. It is contrasted with tax depreciation, which is whatever the tax authorities allow you to use when filing income taxes.
Through implementation of facility asset management systems detailed in preceding recommendations, the Office of Management and Budget can ensure optimal use of federal facilities by having federal agencies guide budget development of federal facility renewal strategies by
- Creating working capital funds or revolving funds to aggregate funding for capital investment into consolidated, agency-wide budget accounts, which could help smooth multiyear life-cycle spending and avoid large, disruptive year-to-year funding spikes;
- Installing user-pays models for all federal facilities that fund working capital required to sustainably operate, maintain, repair, and renew federal facilities;
- Allowing the General Services Administration to spend all the revenue collected in the Federal Buildings Fund for repairing, renewing, or replacing facilities managed by the Public Buildings Service;
- Encouraging agencies to identify noninherently governmental facilities and related services that are mirrored by a broad-based, active private market to be candidates for privatization, outsourcing, or public–private partnerships;
- Using the expedited disposal authorities created by the Federal Asset Sales and Transfer Act (FASTA), or seeking additional disposal authorities for properties not covered by FASTA, to dispose of unneeded and underutilized properties; and
- Using operating leases as an alternative to ownership when budget scoring rules show that the cost of owning is unlikely in the near-term budget outlook.
(See Findings 3-1, 3-2, 3-4, 3-5, 3-6, 3-7, 4-4, 5-1, 6-1, 6-2, 6-3, 6-4, 6-5, 6-6, 6-7, and 6-8.)
A crosswalk of findings and recommendations is in Table 7-1, and Appendix H provides the consolidated list of findings and recommendations.
CONCLUSION
Robust, effective federal facility renewal strategies are possible when implemented using disciplined facility asset management systems; successful implementation of disciplined asset management systems is enhanced when using ISO 55000 standards. This asset management systems approach requires agencies to be more attentive to dynamic mission requirements and stakeholder expectations. To accomplish this, certain federal government policies need to be considered that limit or affect systematic, risk-based facility resource-and-investment decision making. This will require agencies to reassess their facility asset management
TABLE 7-1 Crosswalk of Findings and Recommendations
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capabilities that may result in the need for large-scale or targeted transformational change. The outcome of these efforts will help agencies better assure key stakeholders that facilities are being well managed, and are responsive to mission needs and performance expectations. The committee finishes its report highlighting the words of Air Force Secretary Heather Wilson when she declared the Air Force’s commitment to its facilities renewal strategy:
In the Air Force, we fight from our bases. The places we call home are also the platforms from which we project combat power. Hangers are not just structures; they are protectors of our assets. Runways are not just pavements; they are our starting lines. If our facilities fail, we fail. The Infrastructure Investment Strategy is how we succeed. (USAF 2019)
The committee believes that this focused message is how all federal facilities renewal strategies should be viewed and tailored to support each federal agency’s mission.
